Will April Showers Bring May Flowers? (Here's Hoping)
May 6, 2024
Markets In Review
Markets experienced April showers this month with most all major domestic indices falling from their 2024 Q1 highs. The S&P 500 Index saw a pullback of-4.16% from its first quarter high, ending April down -3.97. The NASDAQ Composite finished -4.41% and the Dow Jones Industrial Average -5%. Ten of the 11 sectors of the S&P 500 saw negative returns, with the lone positive sector comprised of defensive utility stocks (S&P Utilities Index +1.65%) and the worst performing being comprised of real estate equities (S&P Real Estate Index -8.5%).
However, markets are positive in 2024 with the S&P 500 +5.57%,NASDAQ +4.31%, and DOW +.34%. Foreign markets found some higher ground but were not completely immune with the MSCI Europe Index down -1.42% and the Nikkei 225 flat at 0%. The MSCI ACWI ex US IMI was up 4.86%.
Economic Headlines & Looking Ahead
Economic headwinds were a theme for the start to the second quarter of 2024. Markets dipped in early April due to a stronger than expected jobs report and a dip in the unemployment rate where nonfarm payrolls put a dent in hopes of an often-predicted cut in the Fed Funds Rate. The Federal Reserve left its policy rate steady at 5.25% to 5.50%, pointing to lack of progress toward its inflation target of 2%. The Core PCE Price Index outpaced its 2.7% estimate coming in at 2.8%. We believe this outpacing along with real consumer spending increasing to .5% is a signal that consumers have yet to pull back despite stickier price increases. Still, The Federal Reserve Open Market Committee has stated that it will slow the runoff in its balance sheet holdings of U.S. treasuries beginning in June.
The World Interest Rate Probability Index via Bloomberg continues to point toward rate cuts throughout 2024 with the policy rate expected to dip below 5% by yearend. Further market declines were fueled by fractures in consumer confidence as measured by various University of Michigan surveys that lagged estimates. The Conference Board’s ‘Consumer Confidence Survey’ declined for a third consecutive month and reached its lowest level since July 2022.1 Real consumer spending for the first quarter was down to 2.5% from its forecasted 2.8% figure while Q1 Gross Domestic Product (GDP), at 1.6% missed its 2.5% target. Building permits (-3.7% actual vs -4.3% forecasted), new home sales (693k actual vs 668k forecasted), and durable goods orders (2.6% actual vs 2.5% forecasted) were all better than expected.
Oil reached $92+ a barrel due to escalations in the Middle East, but pared gains through the end of the month. June 2024 Futures are down across the board for domestic indices and mortgage rates have climbed above 8%in some markets but have not dented housing price gains. Earnings season will continue through May, with most of the larger names having reported in April. Of the ‘Magnificent Seven’ – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla – five have reported with Apple and NIVIDIA to report in May. Those growth tech stocks that had an outsized role in driving market returns for2023, will likely continue to make or break portfolios. Amazon, Alphabet, Meta, Microsoft all beat estimates with Tesla earnings missing the mark.
Brandon Cooper
Portfolio Management Associate
1https://www.conference-board.org/topics/consumer-confidence
Published April 30, 2024; Accessed May1, 2024
The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market and it is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange.
The S&P500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices.
The S&P500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.
The S&P500® Real Estate comprises those companies included in the S&P 500 that are classified as members of the GICS® Real Estate sector.
The PCE Price Index Excluding Food and Energy, also known as the core PCE price index, is released as part of the monthly Personal Income and Outlays report. The core index makes it easier to see the underlying inflation trend by excluding two categories – food and energy – where prices tend to swing up and down more dramatically and more often than other prices. The core PCE price index is closely watched by the Federal Reserve as it conducts monetary policy.
The MSCI Europe Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of September 2002, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
The Nikkei225, or the Nikkei Stock Average, more commonly called the Nikkei or the Nikkei index, is a stock market index for the Tokyo Stock Exchange. It is a price-weighted index, operating in the Japanese Yen, and its components are reviewed twice a year.
The MSCI ACWI ex USA Investable Market Index (IMI) captures large, mid and small cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 24 Emerging Markets (EM) countries.
Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period.
The Conference Board’s Consumer Confidence Survey is a monthly survey of US consumer attitudes, spending plans, and expectations for inflation, stock prices, and interest rates.
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